What is an NFT? Where can I find one? There is no point in purchasing a digital file that I can simply copy in a matter of moments, right?
In this post, I’ll cover these questions and more.
Today’s topic is NFT. NFT stands for non-fungible token.
Table of Contents
- What exactly is fungible?
- They are basically unique coins, but what are they used for?
- How do you know what is the original and what is a copy? And does it even matter?
- So our NFT is the next big thing. Is it the future?
- What will NFTs be used for in the future?
What exactly is fungible?
You can think of something as fungible, interchangeable, or having no distinguishing characteristics. For example, if I have a one-dollar note and ask you to trade it for another one-dollar bill, you're unlikely to object because they're essentially the same item, indicating that both dollar bills are fungible. If you have a rare dollar bill with a unique marking or serial numbers, such as one two three four five six seven eight, or a true binary serial number, in which all of the digits are either a zero or a one, you are unlikely to exchange it. These $1 bills are highly rare and can be worth up to $5000 or more when traded. These bills are non-fungible, in other words. They are one-of-a-kind and have characteristics that set them apart from the rest of the bills.
A non-fungible token is analogous to a one-of-a-kind dollar bill. It's a digital coin with its own set of characteristics. Interesting fact Bitcoin and many other cryptocurrencies are non-fungible in the sense that a coin's history can be attached to it, which means that if a bitcoin was used for illegal activity, it may be worth less than a newly minted bitcoin with no history, but more on that in a future video about NFTs.
They are basically unique coins, but what are they used for?
They're used to prove ownership of a digital file or a digital certificate of authenticity, to put it that way. Confused? Don't be concerned. Let's have a look at it in more detail. When we look at a work of art, such as a painting, the original painting is always considerably more valuable than its reproductions, and there are certain methods you may use to confirm that picture's authenticity. Getting a certificate of authenticity, for example. When it comes to a digital file, however.
How do you know what is the original and what is a copy? And does it even matter?
It appears that it does. People are collecting digital things in the same way they acquire tangible art. For instance, I could write an e-book and sell the first edition as a non-fiction title. Whoever buys it from me will be able to claim ownership of the very first copy of my book. But, as you can see, this is where things get tough.
It's not as if I handed the buyer any rights to my book or anything else substantial. I merely offered the customer the right to brag about being the first owner of the book. So, unlike purchasing a painting in person and taking it home, you have no control over the products you're purchasing with an NFT. As a result, it's debatable how valuable NFTs really are. In other words, an NFT is only worth what the next man is prepared to pay for it. And if it doesn't exist in the physical world, some people find it difficult to comprehend. Let's have a look at how an NFT is actually made. A maker develops a digital good. This could be a picture, a video, a tweet, a website, or anything else that exists online.
The developer then creates a coin, or more accurately, a token, on a blockchain that supports smart contracts, such as Ethereum, Cardano, or Solana. The information about the digital items being sold is stored in this token. The name of the token, the symbol for the token, and a unique hash that validates the NFT's legitimacy are all included in this data. Keep in mind that the token only stores attributes about digital products, not the goods themselves. Therefore, even if the NFT may point you to a website where you may download the file, that link isn't special in any way and can be used by anyone. After it has been created, the creator can sell the token to someone else, who will then take ownership of the digital good.
In a nutshell, an NFT is a blockchain-based token that serves as a digital certificate of authenticity. It may be promptly verified and also shows the previous owners' history. NFTs are indivisible, easily transferred, fraud-proof, and programmable, in addition to being non-fungible or unique. This means that NFT creators can determine whether or not they want royalties paid to them each time an NFT is sold. CryptoPunks, for example, is a collection of 10,000 eight-bit style pixel art images of, well, punks that are sold as NFTs and whose price has risen dramatically. Several million dollars have already been spent. NBA Top Shot, for example, is a marketplace where fans may trade NFTs of NBA moments. These are video clips that have been packed as an NFT. It reminds me of the trading cards we used to have when we were younger. Another way for players to make money is by using NFTs for sports highlights. When a Topshot moment in which they are featured is sold as an NFT, they receive royalties. Other well-known examples include Twitter co-founder Jack Dorsey selling his first tweet as an NFT for $69 million and artist Beeple selling an NFT of his work for $69 million.
Let's get down to business now that we've covered the theory. How do you go about purchasing an NFT? The two forms of NFT marketplaces are centralized and decentralized, respectively. You can sign up for a centralized marketplace and fund your account with a credit card or another method of payment.
For example, Nifty Gateway is a centralized NFT marketplace owned by the exchange Gemini. There you can buy NFTs using your Gemini balance.
If you wish to buy NFT through a decentralized marketplace, though, you'll need a wallet that's compatible with the blockchain your NFT was formed on. MetaMask, for example, is the most popular solution for Ethereum. It's a browser plugin wallet that allows you to log into decentralized NFT marketplaces like as OpenSea, Rarible, and Super Rare. In the explanation below, we'll include links to all of these marketplaces as well as MetaMask. You can simply buy or bid on different NFTs on the marketplace once you have funded your account or wallet. In the end, an NFT is nothing more than a coin (or token, to be more accurate) that you store in your wallet, just like any other cryptocurrency. Keep in mind that, unless you're a die-hard collector, you'll have to sell the NFT at some time, and NFTs aren't particularly liquid. To put it another way, they don't always have a market for them to sell to. It's difficult to find someone willing to pay thousands of dollars for a rare baseball or Pokemon card, just as it's difficult to find someone willing to pay thousands of dollars for a rare baseball or Pokemon card. As you may expect, this market is dominated by hype. This could result in a situation where a person purchases an NFT for millions of dollars only to discover that he is unable to sell it later because demand in that specific NFT has waned.
So now we're left with the question of whether an NFT is nothing more than bragging rights over a digital file. What am I supposed to do with it? Most people, on the other hand, come up with inventive methods to flaunt it. Some NFTs, for example, are digitally shown at art galleries. Another innovative idea that has gained traction is to utilize a digital frame to show the NFT and put it in your home. You can also utilize a physical print of the NFT with a QR code next to it that points to your blockchain proof of ownership. There are also online galleries within virtual worlds where NFTs can be seen. As you can see, there are numerous options for showcasing your latest digital artwork. However, NFTs aren't just for art. In fact, an NFT can be used to produce anything that is unique or requires proof of ownership. An NFT is just a way to identify something as your own in the digital sphere. As a result, NFT technology can be advantageous for anything that requires this kind of tagging.
For instance, Decentraland is a digital setting where users can buy digital land to resell or use for advertising. NFTs can be used in online games to validate ownership of valuable digital items that players can then exchange for one another. NFTs are used to establish ownership of domain names in Unstoppable Domains, which we've already discussed. In DeFi, NFTs can be used as collateral instead of bitcoins. In the real world, it's the same as putting something you own up as collateral for a loan.
NFT is an example of an NFT collateralized lending marketplace. As you can see, the possibilities are limitless.
So our NFT is the next big thing. Is it the future?
It's difficult to say. On the one hand, it appears that everyone is talking about NFTs, and that all of the major corporations are entering this market. On the other hand, it's difficult to comprehend the idea of people paying millions of dollars for a digital proof of ownership with no real-world claim. Only time will tell how NFTs will fare in the future. That concludes today's video. Hopefully, you now understand what NFTs are. Tokens of cryptocurrency that serve as proof of ownership for a digital item.
What will NFTs be used for in the future?
NFT technology is still in its infancy, but it has a lot of potential in the future. NFTs can be used for a variety of tasks, including:
- Trading & Investment: NFTs can be used to trade and invest in digital assets, which is one of the most obvious applications. Everything from rare collectibles to virtual real estate could be included.
- Loyalty programmes: NFTs could be used by businesses to reward customers for their loyalty. Customers who have accumulated a particular amount of loyalty points, for example, could receive free meals or discounts.
- Digital rights management: NFTs could be used to prevent piracy and unauthorised usage of digital content and data. This might be especially valuable for painters, musicians, and other creatives who don't want their work copied or used without authorization.
- Gaming: NFTs could be used to generate one-of-a-kind products that can be traded or sold in games. This might bring gaming to a whole new level of excitement and rivalry, as well as give a method for gamers to profit from their pastime.
- Identity management: NFTs could be used to confirm people's online identities. This may aid in the reduction of fraud and the promotion of trust in online interactions.
These are just a few examples of how NFT technology could be used. As technology advances, there will undoubtedly be a plethora of new applications that we have yet to envision.